Primerica targets 20% ISP sales growth in 2025 while addressing life sales headwinds

Earnings Call Insights: Primerica, Inc. (PRI) Q3 2025

MANAGEMENT VIEW

* CEO Glenn Williams highlighted, "Primerica delivered solid earnings growth and generated strong cash flows during the third quarter of 2025, underscoring the resilience of our business model and consistent execution as our clients gradually adapt to economic headwinds." Williams stated that adjusted net operating income reached $206 million, up 7% year-over-year, and diluted adjusted operating EPS increased 11% to $6.33. He noted that $163 million was returned to stockholders in the quarter, with $129 million via share repurchases and $34 million in regular dividends, totaling $479 million year-to-date.
* Williams explained that both recruiting and licensing were down compared to the prior year, which benefited from elevated post-convention activity, but "current levels remain healthy relative to historical trends in nonconvention years." The company expects to end the year with around 153,000 life license representatives, slightly above last year's record level.
* Williams reported a 15% year-over-year decline in new Term Life policies issued, attributing the drop primarily to "cost of living pressures in the middle market," and projected a full-year decline of about 10% in policies issued compared to 2024. He emphasized ongoing efforts to improve productivity, including product enhancements and new training for representatives.
* Regarding the Investment and Savings Products (ISP) segment, Williams stated, "Sales grew 28% year-over-year to a record $3.7 billion during the third quarter of 2025," with net inflows of $363 million and client asset values reaching $127 billion, up 14% year-over-year. Williams projected, "Given the strength in the equity markets and continued momentum, we expect full year ISP sales to grow around 20% in 2025."
* Williams noted that the mortgage business achieved nearly $370 million in U.S. mortgage volume year-to-date, up 34% versus the first nine months of 2024, and is now licensed in 37 states.
* CFO Tracy Tan stated, "Our third quarter financial results were strong across all segments, giving us confidence that we're well positioned to end 2025 with solid year-over-year growth in both revenues and earnings."

OUTLOOK

* Management maintained full-year guidance for the Term Life segment: ADP growth around 5%; benefits and claims ratio stable at around 58% in the fourth quarter; DAC amortization and insurance commissions ratio around 12%; operating margin around 21% for the quarter, with expectations for some accelerated technology investments. Full-year operating margin is expected to be above 22%.
* Williams reaffirmed, "Given the strength in the equity markets and continued momentum, we expect full year ISP sales to grow around 20% in 2025."
* Tan indicated that fourth quarter expenses are expected to grow around 6% to 8%, resulting in full-year growth towards the lower end of original guidance due to realized expense savings.

FINANCIAL RESULTS

* Adjusted net operating income for the third quarter was $206 million. Diluted adjusted operating EPS was $6.33.
* Term Life revenues were $463 million, up 3% year-over-year. Pretax income was $173 million, compared to $178 million in the prior year period.
* The ISP segment reported operating revenues of $319 million, a 20% increase from the prior year period. Pretax income in this segment rose 18% to $94 million.
* Corporate and Other Distributed Products segment recorded pretax adjusted operating income of $3.8 million, compared to a pretax loss of $5.7 million in the prior year period.
* Consolidated insurance and other operating expenses were $151 million, up 4% year-over-year.
* The net unrealized loss in the invested asset portfolio improved to $116 million by quarter-end.

Q&A

* Joel Hurwitz, Dowling & Partners: Asked about the planned capital drawdown from the insurance entity in Q4 and drivers for weaker term sales. Tan responded that "our capital position remains very strong," with specific plans in place for the fourth quarter to increase cash conversion from insurance entities. Williams attributed weaker term sales mainly to "cost of living and other general uncertainties," noting that "clients are having to dig deeper into their budgets to reprioritize because their budgets are tighter."
* Francis Matten, BMO Capital Markets: Inquired about sustainability of ISP sales growth and cash flow outlook. Williams said breadth across product lines adds confidence in the trend, but also cited market risk. Tan emphasized "very good long-term potential from the fee business cash generation" and highlighted an 80% capital return to stockholders.
* Ryan Krueger, KBW: Asked about Q4 Term Life margin and ISP fee rate trends. Tan reported consistent Term Life performance and noted accelerated technology investments targeted at productivity. She attributed the ISP fee rate trend to a "mix shift because of client demand," particularly growth in managed accounts and variable annuities.
* Wilma Burdis, Raymond James: Sought clarity on forward impact from assumption review and future trajectory of Term Life sales. Tan clarified the $23 million remeasurement gain is modest due to reinsurance structure. Williams stated the challenging environment is "temporary," with actions being taken to support clients.
* John Barnidge, Piper Sandler: Queried about the impact of mortgage refinancing and government employee exposure. Williams explained that refinancing can free up more than the cost of a life insurance policy, but does not expect government shutdowns to be a major factor.
* Daniel Bergman, TD Cowen: Asked about the decision to push the next convention to 2027 and capital management. Williams detailed plans for regional events in 2026 to drive momentum, while Tan discussed maintaining conversion ratios and capital plans tied to growth pace.
* Mark Hughes, Truist Securities: Addressed trends in asset-based revenue and YRT ceded premiums. Williams and Tan cited product mix as the primary driver and explained the steady nature of combined ratios.
* Suneet Kamath, Jefferies: Focused on mortality assumption updates and annuity sales growth sources. Tan described the assumption update as the "best estimate" for long-term mortality trends, while Williams noted that annuity sales reflect both demographic shifts and new client acquisition.

SENTIMENT ANALYSIS

* Analysts generally expressed slightly negative to neutral sentiment, pressing on headwinds facing Term Life sales, sustainability of ISP growth, and capital conversion. Several questions probed for drivers of weaker performance, with analysts highlighting uncertainties and seeking clarity on future trends.
* Management maintained a confident, but at times defensive, tone. Williams frequently pointed to environmental challenges but also emphasized resilience and "conviction in the future potential for our life business." Tan's remarks regarding capital conversion and cash flow were detailed and optimistic, with statements such as, "our total business profitability is very, very sound at over 20%."
* Compared to the previous quarter, the management tone shifted slightly more defensive regarding Term Life headwinds, while confidence in ISP growth and cash flow conversion remained strong. Analyst tone remained consistent, with persistent focus on understanding the depth and duration of headwinds.

QUARTER-OVER-QUARTER COMPARISON

* Guidance on Term Life policy issuance was revised to a projected 10% decline for the year, compared to a 5% decline projected last quarter. ISP segment full-year sales growth guidance increased to 20%, up from "more than 10%" previously.
* Management continues to highlight cost of living pressures as the central challenge for Term Life, with increased focus on productivity improvements and training in the current quarter.
* Analysts sustained a focus on the sustainability of ISP momentum and capital deployment, while also probing for signs of stabilization in Term Life sales.
* Management's confidence in ISP growth and cash flow conversion strengthened further, while tone regarding life sales became more cautious.
* Key metrics such as adjusted net operating income and ISP sales showed sequential growth, while Term Life sales faced greater headwinds.

RISKS AND CONCERNS

* Management identified cost of living pressures and general economic uncertainty as primary challenges for Term Life sales.
* Persistency rates remained stable, but lapses continued above long-term assumptions.
* Uncertainty related to government policy and interest rates was cited as an additional headwind, with Williams noting, "there's just an unusual amount of uncertainty to add to the financial pressure."
* Analysts raised concerns about the durability of ISP sales momentum and the potential impact of capital management strategies on future growth.

FINAL TAKEAWAY

Primerica's Q3 2025 results demonstrated strong earnings and robust ISP segment performance, with management projecting 20% full-year ISP sales growth. While Term Life policy issuance is expected to decline 10% for the year amid persistent cost of living pressures, the company highlighted ongoing investments in product improvements, training, and technology to support future growth. Leadership expressed confidence in capital strength and the ability to generate long-term value for shareholders, even as near-term headwinds continue to pressure the life insurance segment.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/pri/earnings/transcripts]

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